No respite for small businesses

Published: 28 April, 2009

KNUTSFORD: The Forum of Private Business (FPB) argued that although the Government unveiled a new £1.7bn job creation fund in the April 2009 Budget, nothing has been done to help smaller employers hold on to their key staff.

"We are experiencing the worst economic conditions that most business owners have ever seen. We needed a bold strategy for business recovery, which the chancellor has failed to deliver at all levels," said Noel Guilford, the FPB's national chairman.

In its latest quarterly Referendum Survey, members of the FPB voted for restoring business confidence (65%) and restoring consumer confidence (63%) as the two issues they most wanted the Government to prioritise in the Budget in order to support their businesses.

The FPB addressed four key elements in its submission to the Government: improving access to finance for small businesses; minimising the cost burdens of small businesses; protecting employment; improving economic activity; improving access to finance for small businesses.

The FPB also urged the Government to monitor the banks more effectively to ensure that measures such as the Enterprise Finance Guarantee (EFG) and quantitative easing directly address restrictions in credit. "Of particular concern is the viability of the Small Business Lending Monitoring Panel, which has met on just five occasions since it was set up in November 2008," said Noel Guilford.

"Many businesses will not qualify for the new £5bn credit insurance scheme, which is temporary - it will come into effect on 1 May and cease taking applications on 31 December 2009 - and will only be available for businesses that have had their credit insurance cut from 1 April 2009. Companies which have had it withdrawn completely will not be covered."

Minimising the cost

Although doubling some capital allowances and extending loss carry-back will help some small businesses with their cashflow difficulties, none of the FPB's proposals to reduce the burden of creeping costs, including cutting the lower rate of corporation tax to 20%, scrapping increases in fuel duty and freezing the minimum wage were adopted by the Government. Measures to ease rates costs, including making enrolment for Small Business Rate Relief automatic, reconsider imposing supplementary business rates and freezing the scheduled 5% increase in business rates (the Government is instead spreading out the increase over three years) were not taken up.

Protecting employment

The FPB is concerned at increasing employment costs. These include measures designed to protect workers, which could backfire and increase unemployment because many employers will not be able to afford them and will be forced to close their businesses.

"The FPB called for minimum redundancy pay to be frozen, but the chancellor stuck by plans increase it from £350 to £380. In addition, National Insurance contributions will still increase from 2011, a disincentive to recruitment when businesses hit by the recession could be in a position to take on staff again.

"A job creator's allowance scheme, and a modified Working Tax Credit scheme, which would allow employees on shorter working hours to have their pay supplemented, did not materialise, said Mr Guilford.

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